Bullish future for the Indian Crop Protection Industry- Rabo India report
As per Rabo India's latest research report, the future prospects of the Crop Protection Industry (CPC) in India look positive. This is largely due to the increasing number of types of insects, pests and diseases, which are becoming resistant to the available pesticides. Furthermore, existence of opportunities for both multinationals and generic companies has enhanced the development prospects in the industry. Interestingly the trend of sluggish volume growth rate for CPC use over the last decade is now changing, as a result of shifting cropping patterns, decreased farm labour availability, increased awareness, brand consciousness and better price realizations to the farmers for their produce.
Tweet-- As per Rabo India's latest research report, the future prospects of the Crop Protection Industry (CPC) in India look positive. This is largely due to the increasing number of types of insects, pests and diseases, which are becoming resistant to the available pesticides. Furthermore, existence of opportunities for both multinationals and generic companies has enhanced the development prospects in the industry. Interestingly the trend of sluggish volume growth rate for CPC use over the last decade is now changing, as a result of shifting cropping patterns, decreased farm labour availability, increased awareness, brand consciousness and better price realizations to the farmers for their produce.
Improving sales with changing policies
"It is expected that the CPC sales in India will see a strong recovery in 2010, with more favourable weather, rising commodity prices, the use of Genetic Modified varieties which have lower irrigation requirements and government policy initiatives to support oilseed crops in particular" said the report author Vaishali Chopra. She also added that "high commodity prices this year will positively impact the CPC sales."
Government led initiatives such as announcement of fixed Minimum Support Prices (MSP) at the beginning of each crop season for major agricultural commodities, will result in better buying power for the farmers and higher use of CPCs to earn maximum returns from the crop cultivated.
Further consolidation in the industry is expected
Currently, there are 35-40 large CPC manufacturers and about 400 CPC formulators in India. It is likely, that to increase their market share, Indian companies will undergo further consolidation and cooperate with other Indian and multinational companies or take up more contract work for multinational players. "As most CPC companies in India are generic manufacturers, in most cases they are expected to enter into Joint Ventures or Mergers & Acquisition deals with foreign players to get access to newer CPC molecules. This will certainly enhance their product portfolio and make them more competitive in the global CPC market" added Ms Chopra.
Benefitting from changes in patent law
The Indian government's switch to a product patent rather than a process patent gives further incentives to India's CPC companies to expand. With the introduction of the product patent regime in 2005, Indian companies now have the incentive to increase expenditure on Research & Development (R&D) as competition from multinational companies increases.
Generic companies: Focus points
There are attractive opportunities for all generic players as CPCs move from being sold as patented products to off-patented and then finally generic. Patented products currently comprise only 35% of the total global CPC market while generic players provide around 30% of the total off-patent sales. Interestingly as multinational innovator companies shift more R&D dollars towards the seeds & traits business, there is window of opportunity for Indian companies in the area of contract research and manufacturing services.
Innovator companies: Funnel for new products
During 2008, the level of Research & Development (R&D) expenditure for the 15 leading companies within the global CPC industry has increased by an estimated 10.6% in constant US Dollar terms, reaching a total of USD 5,118 million. Between 2000 & 2008, the overall level of R&D expenditure incurred by these companies grew at CAGR of 5.4%.
Spending on R&D and new molecule introductions by multinationals has a direct impact on the Indian market as about half of the top global multinationals have their presence in the Indian market. It is exciting to see that Indian players are increasingly diversifying into the seeds business by utilizing their existing distribution channel.
Export Opportunity
Report author, Vaishali Chopra said, "Nearly half of the CPCs manufactured in India are exported. Indian CPC companies' low cost advantage has made the export market particularly attractive. Export growth of crop protection chemicals is expected to continue as herbicides and fungicides outpace insecticides.
Consolidation is Key: Generic & Innovator Companies
Over the last few years, M&A activity within the global CPC industry has been driven by the medium and smaller-sized companies, in seeking to reposition themselves to better compete with the six major R&D driven companies, who are the industry leaders. To expand their geographical reach and market share, Indian companies will have to follow the inorganic growth route, given the background of excessive regulatory environment and regional nature of different markets. Manufacturing and marketing the off-patent products, will help generic companies to tap the remaining 45% of the off-patent market, which is still being catered to by the innovator companies.
To conclude, the Indian CPC market is expected to grow by 3.2% per annum in value terms in the next two to three years. If the players manage to capture the off-patent market, this growth is expected to continue in the long term.
Notes to Editor
Notes to Editors
Established in 1998, Rabo India Finance Limited is a 100% subsidiary of Rabobank International. Through a wide spectrum of fund and fee based products and services, Rabo India offers sector specific knowledge-based customized solutions in the following core competencies: Food and Agribusiness, Renewable Energy and Carbon Credits, Corporate Finance, Private Equity, Capital Markets, Mergers & Acquisitions and Corporate Advisory, Trade and Commodity Finance and Microfinance. The company is backed by a local pool of intellectual and monetary resources as well as Rabobank's global network. Rabo India is committed to partnering with clients in creating and providing innovative solutions to their business needs.
Rabobank Group is a full-range financial services provider founded on co-operative principles and awarded a Triple A credit rating from both Moody's and Standard & Poor's since 1981. Headquartered in Utrecht, The Netherlands, the Group employs more than 60,000 staff in 43 countries, servicing the needs of more than nine million clients worldwide. Rabobank Group's operations include retail banking, wholesale banking, asset management, leasing and real estate. Food & Agribusiness is the international prime focus of the Rabobank Group.
Rabobank International ("Rabobank") is the Group's wholesale bank and international retail bank, providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness.
For more information, please contact:
Nayna Banerjee
Rabo India Finance Limited
PH; 022 22034567 Ext 241
Email:
nayna.banerjee@rabobank.com
Nikita Merchant
Hanmer MS&L
Ph; 022 67524600 Ext 689
Email:
nikitamerchant@hanmermsl.com
